I dun think it's dead. It's just that the premise - that you're taking jazz in a new direction, and you're blending jazz with rock - is such an ambitious one that few people ever really live up to it. It's not easy to understand fusion - you have to understand both jazz and rock. Probably R+B as well.
But it will probably never be very popular because it's not easy to understand. At least for traditional bebop jazz you know it's the chord sequence stated in the theme, and the rest of it is the same, just instruments improvising over it. But fusion wants to take even that basic framework away.
First is "In a Silent Way" and "Bitches Brew" by Miles Davis. You can consider both of these albums the birthplace of fusion. They were experimental at that time and extremely controversial. It was only around 10 years ago that their status as classics became secure. I only started understanding what was going on only 3 or 4 years after I started listening to them.
Why are these 2 albums important, because the people who played on them branched out and became, themselves, important people in fusion. Joe Zawinul and Wayne Shorter created Weather Report, one of the great fusion bands. Herbie Hancock had his Headhunters. Chick Corea had his Return to Forever. John McLaughlin had his Mahavishnu Orchestra. Keith Jarrett joined Miles Davis only after those 2 albums, but he joined up with Dave Holland who was on those 2 albums. Tony Williams, McLaughlin and Larry Young had that fusion thing with Lifetime, which predated "In a Silent Way". Larry Young's later albums also incorporated some fusion stuff.
Also crucial to understanding fusion, you need to understand the people that Miles Davis was listening to, which convinced him that he had to somehow incorporate the exciting things that were happening in rock: people who were blending rock with R+B, like Jimi Hendrix, Sly Stone and James Brown.
Fusion can sometimes sound like there's nothing much going on. There aren't much clues to tell you what's happening. I made the mistake of thinking that "Heavy Weather" was a piece of crap until I listened to it later and heard a lot of things I didn't hear the first time around. I dismissed "Birdland" at first because it sounded so simple and commercial. I was completely wrong. It is a work of genius precisely because it's so complex and yet it sounds so simple. That song has at least 6 or 7 different motifs, but it blends together so well you don't even realise.
There are very few rules, and because of that you don't know what to expect and you miss a lot of the structure. So fusion is great because of its capacity to surprise. But many people don't have the discipline, dun have the ideas and content, and a lot of fusion is substandard.